Morgan Stanley analysts believe that Microsoft Corp. has the potential to join Apple Inc. in the exclusive club of stocks with a market capitalization surpassing $3 trillion. Fueled by advancements in artificial intelligence, Microsoft is well-positioned to benefit from the growth of AI and expand its business processes.
Microsoft Corp., driven by artificial intelligence-powered advancements, could potentially join Apple Inc. in the prestigious league of stocks with a market capitalization exceeding $3 trillion, claim analysts at Morgan Stanley.
They have set a new price target of $415 for the software giant, implying a valuation of approximately $3.1 trillion. Led by Keith Weiss, the analysts identified Microsoft as their top pick among large-cap software companies and emphasized its favorable position to capitalize on the growth of AI.
In a note, Weiss expressed that generative AI holds the potential to significantly expand the range of business processes that can be automated using software. He further stated that Microsoft is optimally situated in the software sector to monetize this expansion.
The market has witnessed a surge in enthusiasm for all things related to AI, which has contributed to the remarkable performance of Microsoft shares this year. Notably, the success of OpenAI Inc.’s ChatGPT tool, backed by Microsoft, has added to the excitement. Leveraging OpenAI technology, Microsoft aims to revamp its entire suite of Office applications, including Excel, PowerPoint, Outlook, and Word.
Despite a 42% surge in its share price this year, Weiss considers Microsoft’s valuation to be reasonable. He pointed out that the stock’s PEG ratio, a metric used by growth-oriented investors that compares the price-earnings multiple to the expected earnings growth percentage, remains in line with historical averages, even considering its exceptional position in generative AI.
Weiss raised his price target to $415 from $335, making it the second-highest among Bloomberg-tracked analysts, following Redburn’s target of $450. Morgan Stanley has maintained an overweight rating on Microsoft since early 2016, and the stock has gained over 500% during that period.
The broader Wall Street consensus on Microsoft is overwhelmingly bullish, with 52 analysts rating it as a buy or equivalent. However, only three of them project price targets that imply Microsoft could reach the historic milestone of $3 trillion in market capitalization by next year, according to Bloomberg data.
On Thursday, Microsoft’s stock rose by 0.9%. Last month, Apple achieved a significant feat in Wall Street history by becoming the first company to exceed a $3 trillion market value.
